FAA Earned Value Management Guidance

United States Department of Transportation

Federal Aviation Administration

Earned Value Management

GUIDE

August 2005

TABLE OF CONTENTS

SECTION I FAA EARNED VALUE MANAGEMENT PROGRAM

Introduction

Program Description

Roles and Responsibilities

SECTION 2 EARNED VALUE MANAGEMENT IMPLEMENTATION ON FAA PROGRAMS

Earned Value Management for FAA Programs

Basic Features of Earned Value Management

Process for Implementing EVMS

ANSI/EIA-748 Standard Guidelines for EVMS

Tailoring the EVMS

SECTION 3 EARNED VALUE MANAGEMENT IMPLEMENTATION ON FAA CONTRACTS

Earned Value Management for FAA Contracts

Tailoring the EVMS

Pre-Contract Award Activities

Post Contract Award Activities

SECTION 4 FAA EARNED VALUE MANAGEMENT SYSTEMS CERTIFICATION APPROACH

Certification Approach and Scope

FAA Programs EVMS Certification Process

FAA Contractors EVMS Certification Process

Earned Value Management System Surveillance

APPENDIX 1 -- EARNED VALUE MANAGEMENT REFERENCES

SECTION IFAA EARNED VALUE MANAGEMENT PROGRAM

Introduction

The effective application of Earned Value Management (EVM) in support of integrated program management provides both the FAA and its contractors with timely, accurate, and integrated cost, schedule and technical performance information, for both the total capital investment program and individual supporting contracts. EVM continuously measures the quantity and value of work completed and enables the forecasting of reliable estimates of future performance. The approach has proven to be an effective management tool for programs with performance risk or high interest to management.

The three aspects of earned value referenced in this Guide are defined as follows:

• Earned Value Management (EVM) is a methodology that integrates a program’s (or contract’s) work scope, schedule, and resources with risk management, thereby providing government and contractor managers with objective visibility into progress on their programs and the ability to manage effectively. By reliably identifying trends and problems early, EVM helps program managers effectively plan, control, and manage programs so they can take corrective action and re-plan the work, if necessary. Systematic implementation of EVM throughout the organization facilitates comparison of program performance, enabling managers to make better-informed decisions.

• Earned Value Management System (EVMS) is the integrated set of processes, applications and practice that follow the guidelines in American National Standard ANSI/EIA-748, “Earned Value Management Systems.” The ANSI/EIA-748 guidelines describe the attributes of an effectively integrated cost, schedule, and technical performance management system.

• Earned Value (EV) is the amount or volume of work completed to date, also referred to as the budgeted cost for work actually accomplished or performed. When compared to the planned value for the work and its actual cost, earned value provides objective measures of schedule and cost performance.

The FAA EVM Guide provides specific implementation guidance to program managers and contracting officers in support of the policy established in the Acquisition Management System (AMS) for EVM systems use on FAA programs and contracts. Additionally, the Guide provides FAA program managers, contracting officers, executives, executive committees, and review boards with a further understanding of the application of EVM concepts in support of program management practices in FAA that will contribute to improved program performance.

Program Description

The FAA’s EVM program provides for the effective and consistent implementation of earned value program management across FAA’s capital investment portfolio, including programs supporting the National Airspace System (NAS), agency-wide information technology programs, and other major investment programs such as safety-related programs. The following key components of the EVM program are addressed in this Guide:

• EVM Implementation on FAA Programs;
• EVM Implementation on FAA Contracts; and
• EVM Certification and Surveillance Processes

Section 2.0 provides guidance on which programs are required by policy to use EVM, describes its basic features, and discusses implementation on FAA investment programs. Section 3.0 provides guidance on which contracts are required by policy to use EVM and discusses how it is implemented contractually, pre-award and post-award activities that support the process of placing EVM on a contract.

Additionally, the EVM program includes support processes for program managers in the areas of EVM training, Exhibit 300 – Project Funding Plan (Section 1.H) Reporting, Exhibit 300 – Project Funding Plan (Section 1.H) Preparation, and EVMS program assessments and transition plans that will be addressed in future releases of this Guide.

Reporting EVM Performance Data to Department of Transportation. For FAA major systems or capital investments, the Office of Management and Budget (OMB) tracks and ultimately approves baseline changes through the budgeting process and the President’s Management Agenda “green” level of performance. OMB requires the FAA to show that major capital investment programs have less than a 10% variance from cost, schedule, and performance goals. Program managers must submit quarterly cumulative EVM data and variance analyses (and corrective action plans if necessary) through the FAA Chief Information Officer (AIO) to the Department of Transportation Chief Information Officer (S-80).

EVM Applications. The FAA’s EVM program uses applications to analyze and report EVM performance data (EVM analysis tools). Program managers may likewise use this type of EVM application to analyze and report program performance, as well as applications used to manage programs and produce EVM data (EVM “engines”). A number of commercially available applications produce, receive, analyze, and report data and should be used by program managers to efficiently manage EVM data. FAA has not yet selected either a standard EVM engine or a standard analysis tool, but may do so in the future. Program offices should contact the EVM Focal Point to discuss their options.

Roles and Responsibilities

The Acquisition Executive and the Chief Information Officer are jointly responsible for the FAA EVM program and its consistent application across the capital investment portfolio, including the individual supporting contracts. Correspondingly, the primary roles and responsibilities for the EVM program are assigned to the Acquisition Planning and Policy Division (ATO-A), and the Office of the Chief Information Officer (AIO), Value Management Office. However, the program manager and contracting officer have the most critical roles and will be described first.

To meet the EVM responsibilities listed in policy, the program manager:

• Prepares the investment program for an EVMS certification review, if required, in accordance with Section 4.0, FAA Certification Approach;
  
• Ensures the program management team is adequately trained in program management and earned value management techniques;
  
• Incorporates contract performance reports into the program performance information consistently using the Program Work Breakdown Structure;
  
• Ensures timely preparation and update of the OMB Exhibit 300 annually; and
  
• Estimates cost and schedule at completion based on performance to date, and when required, initiates a request for re-baselining in accordance with FAA policy.

To meet the EVM responsibilities listed in policy, the contracting officer:

• Advises the team preparing the Screening Information Request on the proper use of contract clauses and supporting documentation for EVM;
  

• Formally receives, delivers comments, and accepts EVM-related deliverables; and
  
• Coordinates with the FAA EVM Executive Agent (EVM Focal Point) to ensure that contractor EVM systems are certified when required.
  

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The EVM Focal Point and the Value Management Office work closely together to ensure the EVM program is applied consistently across the FAA.

To meet EVM responsibilities listed in policy, the EVM Focal Point:

• Develops policy and guidance for EVM in support of the AMS;
• Consults with teams on EVM issues during source selection;
• Advises and assists programs with Integrated Baseline Reviews;
• Maintains information about acceptance of contractors’ EVMS
• Coordinates EVMS reviews;
• Manages the EVM training program and curriculum; and
• Serves as a subject-matter expert when reviewing and commenting on the Exhibit 300, Project Investment and Funding Plan (Section 1.H) during the annual preparation process for investment programs.

To meet the EVM responsibilities listed in policy, the Value Management Office:

• Coordinates and manages the preparation of agency Exhibit 300s, including the Project Investment and Funding Plan (Section 1.H), which describes the programs’ Performance Based Management System (EVMS), the program baseline, schedule and cost performance, variance analysis, and corrective action plans, when required; and
• Assists in the development of policy and guidance for EVM in support of the AMS.

SECTION 2EARNED VALUE MANAGEMENT IMPLEMENTATION ON FAA PROGRAMS

Earned Value Management for FAA Programs

The OMB andAMS policies require development, modernization, and enhancement programs to use EVM based on the guidelines in the American National Standard ANSI/EIA-748. FAA programs apply EVM methodologies to the total program effort, including both government and contractor work, to better manage complex, high-risk, high-cost, or high-visibility efforts. While development, modernization, and enhancement programs primarily occur during solution implementation, the work, as approved, may start during final investment analysis and may continue during in-service management.

FAA programs may utilize multiple sources to accomplish the work of the program and commonly assign work to the following performing organizations that must be included in the EVMS:

Government Organizations. Government organizations and personnel (Full-Time Equivalents – FTEs), while commonly used to perform program management and oversight, may also perform engineering, testing, deployment, and logistics support functions. All work and program activities performed by government personnel are assigned using the program Work Breakdown Structure (WBS) and are managed using EVM. FAA programs required to use EVM must include resources for all government DME effort included in the JRC-approved program baseline.

Major Contractors. Major contractors commonly are employed in the areas of design, engineering, development, deployment, and support functions. All work and program activities performed by major contractors are assigned using the program WBS and are managed using EVM. FAA programs required to use EVM must include resources for all major contractor effort included in the JRC-approved program baseline. (See Section 3.0)

Support Contractors. Support contractors commonly perform support roles in one or more areas of program management, engineering, configuration management, test, and logistics. All work and program activities performed by support contractors are assigned using the Program WBS and are managed using EVM. FAA programs required to use EVM must include resources for all support contractor effort included in the JRC-approved program baseline. (See Section 3.0)

Investment programs organize work using the FAA Standard WBS that follows the AMS lifecycle. The use of EVMS during the planning phases (WBS 1.0 and 2.0) is considered a best practice when the work involves prototyping or testing. EVMS is required by AMS policy when the FAA approving authority at the final investment decision approves the program baseline and when a program commences development work prior to the final investment decision. EVM is used during the solution development phase (WBS 3.0), solution implementation phase (WBS 4.0), and in service management phase activities (WBS 5.0), commonly funded by Facilities and Equipment (F&E) funds, including the NAS “Hand-Off” activities, in order to promote the integrity of the performance measurement baseline. The primary consideration in deciding to use EVM is the nature of the work. The decision should not be arbitrarily based on program phase or funding source.

Operational and steady-state programs or useful segments funded by Operations and Maintenance (O&M) funds are not required to use EVM, but may do so when the nature of the work lends itself to earned value performance measurement. These programs perform an annual operational analysis to confirm that realized benefits outweigh costs and that they continue to support agency goals and user needs.

Basic Features of Earned Value Management

EVM methodology periodically (normally monthly, but more frequently when necessary) measures achievement objectively against established goals in a performance baseline plan, helping projects stay on course. It assists in the identification of potential cost and schedule problems early, before they become unmanageable or unrecoverable, and enables estimates of final program cost and schedule. Appendix 1, EVM References, provides multiple sources for the definition and formulas of standard EVM performance measures.

EVM requires the fundamental program management principles of planning, organizing, measuring, and controlling to be implemented systematically to produce a product or service. To apply EVM effectively, program managers:

• Plan all work to completion;
• Break down the work into manageable product-oriented components and assign them to a responsible organization;
• Integrate cost, schedule, and performance objectives into a baseline plan against which progress is measured;
• Record actual costs;
• Objectively measure performance against the baseline plan;
• Analyze variances, forecast impacts, and base estimates at completion on actual performance to date;
• Control and document changes to the performance measurement baseline; and
• Use earned value information in the organization’s management processes.

Process for Implementing EVMS

The generic steps for establishing an EVMS are outlined below. In addition, FAA’s EVM Training Program and Appendix 1, EVM References provide more detailed descriptions of implementation.

• Establish a management control system that meets the guidelines in ANSI/EIA-748;
• Create an integrated performance measurement baseline (resource-loaded schedule of work to be performed at the lowest level required for performance measurement);
• Establish a work authorization system that assigns responsibility for and controls changes to the performance measurement baseline;
• Earn value for planned budgets as work is completed;
• Provide status against the baseline plan and identify significant schedule and cost variances;
• Analyze variances for early warning signs and take corrective action as necessary; and
• Estimate final cost and schedule outcomes

ANSI/EIA-748 Standard Guidelines for EVMS

ANSI/EIA-748 contains guidelines for establishing and applying an integrated management system for cost, schedule, and technical performance. The Standard contains 32 guidelines, grouped into five major categories:

• Organization;
• Planning, Scheduling, and Budgeting;
• Accounting Considerations;
• Analysis and Management Reports; and
• Revisions and Data Maintenance

Due to variations in organizations, products, and working relationships, it is impossible to prescribe a universal system for cost and schedule control. Therefore, the guidelines in ANSI/EIA-748 do not describe a system. Instead, they state the qualities and operational considerations of an integrated management system without mandating detailed system characteristics. In designing and implementing an EVMS, the primary objective of the FAA or contractor should be effective management and control. FAA and contractor organizations have flexibility under this guideline approach to develop an EVMS most suited to their management needs.

The guidelines do not address all FAA needs for day-to-day or week-to-week internal control, such as status reports, reviews, and communications. These internal controls are characteristics of good management and should be used with EVM to provide insight and information necessary to make informed decisions. TheNDIA Intent Guide for Earned Value Management Systems provides additional insight into the 32 guidelines and describes the typical attributes and objective evidence that support compliance with a given guideline.

Tailoring the EVMS

The program manager, assisted by functional experts such as systems engineers, cost performance specialists, and financial analysts, assesses the program’s anticipated size, complexity, risk, criticality, type of contract, and other factors to select the performance management methodology and reporting best suited for effective management control. The program manager, considering all risk factors, tailors EVMS requirements to the program. For example, full compliance with the ANSI/EIA-748 guidelines, with no tailoring, would provide necessary insight into progress on a high-risk program involving a critical, complex integration effort.

Alternatively, appropriate tailoring of EVMS requirements could provide sufficient visibility into performance for a lower-risk program. Once the program manager characterizes the overall nature of the program, EVMS requirements are tailored to ensure an appropriate level of performance measurement and control. Examples of ways an EVMS may be tailored include:

EVM is not required for programs or projects lasting less than one year, but may be used when an existing EVMS can provide reliable information soon after initiation and the program manager has ready access to the information. Although EVM may not be required, it is important that appropriate scheduling, risk, and requirements management practices be applied for effective monitoring and control.